TLDR
- Blockchain Association backs Custodia’s Supreme Court challenge against the Fed.
- Custodia argues eligible state-chartered banks deserve Fed payment system access.
- Lower courts ruled regional Reserve Banks can reject master account applications.
- Kraken’s limited Fed access adds new pressure to the Custodia banking dispute.
- Kansas City Fed must respond to Custodia’s Supreme Court petition by Sept. 11.
The Blockchain Association has backed Custodia Bank as its Federal Reserve master account dispute reaches the Supreme Court. The group argues regional Reserve Banks should not freely reject eligible state-chartered banks seeking direct payment system access. The case could shape how digital asset banks connect with core United States financial infrastructure.
Blockchain Association Backs Custodia Supreme Court Petition
The Blockchain Association filed an amicus brief supporting Custodia’s petition for Supreme Court review. The filing challenges lower court rulings that gave regional Reserve Banks broad authority over master account applications. The group wants the justices to clarify limits on that discretion under federal banking law.
Custodia argues the Monetary Control Act requires Federal Reserve services to remain available to eligible nonmember depository institutions. However, lower courts ruled that Reserve Banks can still decide whether qualified applicants receive master accounts. Custodia now wants the Supreme Court to review that interpretation rather than determine its immediate eligibility.
The Blockchain Association says the issue extends beyond one Wyoming-chartered digital asset bank. According to the group, broad Reserve Bank discretion could restrict lawful industries from essential financial infrastructure. The association argues state-chartered banks should receive consistent treatment when they satisfy legal access requirements.
Custodia Bank Continues Six-Year Federal Reserve Fight
Custodia received its Wyoming Special Purpose Depository Institution charter before applying for a Kansas City Fed master account. The bank submitted its application in October 2020 and later challenged delays in the review process. Custodia sued federal authorities in June 2022 after the application remained unresolved for 19 months.
The Kansas City Fed denied Custodia’s application in January 2023 after reviewing the bank’s digital asset business model. Federal officials raised safety and soundness concerns involving Custodia’s concentration in cryptocurrency-related financial services. Custodia continued its lawsuit and argued that federal law did not permit unlimited Reserve Bank discretion.
A federal district court rejected Custodia’s position in March 2024 and upheld the Kansas City Fed’s authority. The Tenth Circuit later affirmed that reasoning and ruled Reserve Banks retain discretion over master accounts. Then, the full appeals court rejected Custodia’s rehearing request through a 7-3 decision in March 2026.
Kraken Access Adds New Context to Master Account Debate
Custodia’s case now unfolds after another Wyoming-chartered digital asset institution secured limited access to Federal Reserve payment systems. The Kansas City Fed approved Kraken Financial for a limited-purpose master account in March 2026. That decision made Kraken the first crypto-native institution to receive direct Federal Reserve payment access.
Kraken can use core payment services for dollar settlement, but the arrangement carries several restrictions. The account excludes interest on reserve balances and access to Federal Reserve liquidity facilities. Therefore, Kraken receives payment connectivity without several benefits available through conventional Federal Reserve master accounts.
The Federal Reserve has also proposed a broader framework for restricted payment accounts serving eligible financial institutions. The proposal could create another route for qualifying fintech and digital asset firms seeking payment system access. Meanwhile, the Kansas City Fed must respond to Custodia’s Supreme Court petition by September 11, 2026.
